This was expected after the Q1 guidance cut earlier in the month, but the quarterly report is shedding a lot more detail on the outlook for the global economy. FedEx, of course, is a good barometer for the global economy. The short story is the global economy is getting weaker, they’re cutting costs and profits are likely to decline.
Here are some highlights from the conference call and the earnings report (via Seeking Alpha):
“On the economic front, we continue to see modest growth in the global economy. Our calendar year ’12 U.S. GDP growth forecast is 2.2% and 1.9% for calendar year ’13, which is 0.5 points lower than our fourth quarter earnings forecast. For industrial production, we expect a growth of 4.2% in calendar year ’12, slightly below last quarter, and 3% in calendar year ’13, 0.5 points lower than our fourth quarter forecast. Our global GDP forecast is 2.3% for calendar ’12 and 2.7% for calendar ’13, 0.3 points lower than our last call.”
…Turning to the outlook and looking ahead, we’re expecting earnings per share of $1.30 to $1.45 for the second quarter and have lowered our guidance for the year to $6.20 to $6.60 per diluted share. This guidance assume weaker economic growth in the economy than we had expected when we first gave you guidance for FY ’13, as Mike described earlier.
…the global trading economy is still the largest single economy in the world. But over the last several months, particularly as we went into this fiscal year, it’s been disappointing, and I think it’s reflective of the low growth in the United States. You’ve got contraction going on in Europe. And because of North America and Europe, China’s export economy, which has been driven by the consumer economies in the United States, North America and Europe, are reflected in the lower trade numbers.
…I mean we took significant haircuts, that Mike mentioned earlier, to our calendar year ’13 numbers. And so we see economy not improving from here. And I watched Mr. Fisher this morning, the ex-Fed member, saying that he thought the economy was at stall, at current. And I think that it’s kind of voting member, he’s still currently there. I think that’s what we’re seeing.
…I can tell you this on China. The locomotive that has driven China’s growth is its export industries. And with the situation in Europe and, to a lesser degree, in North America, that is a significant issue for the Chinese economy. Now the consumer consumption in China is not increasing at a significant rate contrary to everybody’s hopes. While exports from, say, the United States into China have grown, they are dwarfed by the exports from China into the United States. And as the big economies in Europe and the U.S. have grown or contracted — grown at a far lesser rate or, in the case of certain European countries, have contracted, that’s reflected in the numbers in China. And you can’t escape that. I’ve been somewhat amused watching some of the China observers, I think, completely underestimate the effects of the slower exports on the overall China economy.”